Skip to comments.Falling Import Prices Show China Is Paying For Tariffs
Posted on 06/13/2019 11:53:01 AM PDT by House Atreides
The prices of goods imported into the United States fell in May even as tariffs increased on goods from China.
...Imports from Asian countries outside of China also fell in price, dropping by 0.2 percent in May for a 1.4 percent decline compared with 12-months prior. This suggests that companies that have shifted production out of China are not paying higher prices, undermining one of the key assumptions behind claims that tariffs would drive up prices for U.S. consumers.
Inflation in the U.S. has fallen below the Federal Reserves target of two percent, indicating that consumers have not been squeezed by tariffs. A close examination of prices of tariffed goods show that tariffs are being absorbed by importers and middlemen rather than being passed on to consumers.
Falling import prices are likely to hold down inflation in the U.S., making it more likely that the Federal Reserve will have to cut rates to achieve its price stability target.
(Excerpt) Read more at breitbart.com ...
Keep raising it.... If they’re going to cover the cost anyways may as well
What is stopping a Chinese company from opening a manufacturing facility in Vietnam and slapping a “Made in Vietnam” label, to avoid the tariffs?
In this environment (low inflation), they have to eat the tariffs in order to maintain their share of the market.
Edit to add, and if Chinese businessmen dud that, how’s this going to bring manufacturing jobs back home?
Nothing but Vietnam does not have the same import terms that China does for our goods.
The fact that they will be employing foreigners rather than locals? Believe it or not, some countries actually care about such parochial issues in this glorious world village.
No!! Any displacement of even $.01, even if it’s spread out over decades, will have a butterfly effect on the free market that ends Beyond Thunderdome.
The subsidies that cut export prices from China are themselves damaging the Chinese economy. When it gets to the government paying for a 50% tariff more will have to be extracted from the citizenry to pay for it, more assets will go toward paying for the tariffs. So long as the USA holds firm China will go down the tubs or will accept DJT’s terms of trade.The fly in the ointment is, of course, judges. Some JP in Iowa who unexplainably has a new $500k house just issues a Global Injunction and the tariffs stop.
A linear relationship with the value of the dollar.
Why would we want to allow goods manufactured by slave labor in Vietnam to be imported into the US? If they do this, slap the same tariff on Vietnam.
“What is stopping a Chinese company from opening a manufacturing facility in Vietnam and slapping a Made in Vietnam label, to avoid the tariffs?”
The Chinese government.
They might allow a little of it. But they will not allow wholesale capital flight.
I've been told this could never, ever happen and only consumers will be crushed by tariffs. Weird.
RE: They might allow a little of it. But they will not allow wholesale capital flight.
Let’s say the Chinese-Vietnamese facility gets their money (payment from US importers) exported from Vietnam, can’t this Chinese company in Vietnam then repatriate the money from Vietnam back to China? How is this capital flight?
I predicted this. As a trained economist, I knew China and Chinese companies would be forced to eat most of the tariff increase.
In the short to medium term, China simply cannot afford to have their companies shut down and lay off millions of workers. The cost of doing that is far greater than eating the tariffs.
Contrary to what many think, China is running a very large deficit for the past few years. That’s not going to change because their aging population will require government benefits and subsistence payments.
The Chinese economy is going to be a dumpster fire in a few more years.
All Vandalay. They are what is making it happen. Thanks George.
“This suggests that companies that have shifted production out of China are not paying higher prices, undermining one of the key assumptions behind claims that tariffs would drive up prices for U.S. consumers.”
“How is this capital flight?”
The Capital Stock of a country is the whole of the means of production, not just the profits from it.
Just like when GM makes cars in Mexico. The profits go to GM in the US, but the bulk of the national benefit goes to Mexico in investment capital, jobs/wages (and supporting jobs/wages)and taxes which supports roads and other infrastructure.
The largest increase in overall capital stock goes to Mexico.
China will not allow a wholesale movement of capital stock to Vietnam, the only country they’ve had war with since WWII. And it’s because they are practiced and committed mercantilists.
They mimic the US circa 19th century.
“The Chinese economy is going to be a dumpster fire in a few more years.”
Despite the idiocy of the socialists, statists and regulators-extraordinaire in this country, our free enterprise system simply cannot be beaten - and for sure not by some Johnnie-come-lately economy without the long-term traditions and institutions that are necessary to a growing and innovative economy.
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